The Allowance Game

Recently we started our oldest son on an allowance and it has been amusing for him to near constantly hold his first tonnie in his hand for the last few days. He talks just about non stop about buying something with his money. His personal favorite obsession at the moment is lego, so we keep pointing out he will have to save up some more toonies prior to buying something.

So how did we come up with an allowance system? Well that was a bit of guess work and a few other common suggestions I’ve hear about.

First off, I’ve heard from a few different sources that a rule of thumb for allowance should be about $1/week/age of kid. So according to that we should be giving my son $5 a week, which to start out is just nuts for me. We decided on $2/week because we wanted him to learn about saving up for things. You can’t buy much at $2 and that is the point. He will have to learn to save if he wants anything bigger.

Also I feel pay should reflect what is done for it. Right now his responsibilities are minor. He just have to clear his dishes from the table after supper and lunch each day. Then once a week he is expected to help clean up the kid’s play area in the basement. As we add other duties I’ll be happy to raise up the level of pay.

We also had some prerequisites we were waiting for prior to introducing the allowance. First off he has to be able to count to ten and recognize numbers. After all it’s just about impossible to teach about money with out using numbers. Second he had to get the concept of money, at least the part of that is what we exchange to get things and then we exchange our time doing things to get more money. The last requirement was the fact his wants were exceeding what we where willing to pay for. I really do want my kids to get the idea that wants are unlimited, but money is limited so you have to choose what you want.

So that’s the current plan for allowance in our house. I suspect it will keep evolving for a while, but it’s already been useful to explain some concepts like we don’t replace money. If he loses the money it’s gone and we won’t replace it. So if you have kids on allowance, how much do you pay? What chores do you assign your kids?

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15 thoughts on “The Allowance Game”

Every family has to do what is right for them. The way you handle allowance should reflect your family values around money. As long as the allowance is not rigid and flexible to change with everybody’s needs and learning curve, it’s all good.

We do not tie allowance to chores. This is because we believe that contributing to household tasks is something that is expected because you live in this house and are part of the family. Nobody pays me to do laundry, grocery shop, walk the dog, etc.

That being said, if one of the kids is trying to save for a specific event (or item) we can negotiate a money-for-chores-arrangement for chores above and beyond what is normally expected.

Also, we will consider contributing to a special purchase. For example, if my daughter needs shoes and she wants a pair that are (IMO) over-priced, I will contribute what I think is a fair amount for shoes (what I was willing to pay) and she can pay the difference from her own money. She usually takes a lot of time to consider the purchase when she has to put up some of the money.

Now, our child is still too young for an allowance but I’ve been toying with what approach to use. My education on parenting seems to centre on books by Barbara Coloroso who also extols that kids shouldn’t be paid to do things are is just part of living. I was raised being paid for ‘normal’ chores and to this day they still feel like punishment 😉

I’m going to go back and reread her suggestions for teaching kids responsible finances.

Interesting comments. I don’t have kids yet, so all speculation on my part. Although my wife and I discuss this topic often enough.

I wouldn’t want my children to think they’re getting money for nothing, so I’d expect chores to be a requirement. Although, Dana’s comments make sense too, so some more to think about. I think there is more than money incentives too, so yes I think some chores don’t require money.

I’d argue that while you don’t get paid to do laundry, walk the dog, buy groceries, etc, they are all services you could pay for. You doing your own services saves the household money and its just as important as making money.

I don’t have kids but I do look at myself as a good saver to say the least.
One idea could be to treat the allowance as a simplified version of a pension. The child would of course have to be a certain age and able to understand all these concepts; kept simpple.

Basically if you give your child $2 or even $5 a week, explain to them the benefits of saving and of compound interest. And show them what their money could turn into by a certain age; perhaps by listing things that they could buy.

You give them $4 a week. They decide to save $2. You will than add equal to any amount that they contribute to future savings.
(Pay yourself first + compound interest are 2 things every young person should know)

Good points. I will likely make adjustments as a go with respect to what chores should be paid, while others are just expected. I understand what you are getting at, but I do like the idea of teaching kids about doing work equals money.

I tend to primarily think of allowance as a means to teaching. It’s all in the lessons you want to give, so each family is going to find what works for them.

This is a subject I’ve been struggling with in my head for a while. My oldest is going to be four in a few months, so I figure my wife and I have a little over a year to get it sorted out.

I’m finding it difficult to find a ballance between teaching that work equals money but also teaching to make your money to work for you so you don’t have to work into your old age while at the same time teaching that there is work that has to be done on a regular basis just so you are carrying your own weight.

I think that what we are going to do is have a set group of tasks that must be done just because everyone needs to be a contributing member of the family, then other things that are extras they can choose to do and depending on what they do in a given week the allowance will vary.

Beyond that I think we will let them choose how much to “invest” and I will give them maybe 10% on the money they invest and build a plan with them that shows the benifits of investing and how it will change based on how much they choose to invest.

The worry obviously is that it may all be too much for a five year old to take in. We will give it a try and if is all fails then we will have to revisit it.

As for the amount of allowance, we feel that the rule-of-thumb of $1/year of age/week is too much. We give our kids (ages 15 & 12) about half that amount per week. We’ve created a couple of tight-wads in our kids but they are both surprisingly generous to charities and both of those characteristics make us proud.

Great post and challenging topic! We’ve tackled this in a progressive manner with our kids over the years. First, it’s important to clarify values and understand how money fits into that picture, so that kids get the right idea about accumulating, spending, saving and giving.

We tied allowance in with what we termed a “Responsibility Encouragement Program”. In essence, we focussed on some interests the kids were motivated by (money is only one component) and then setup what became an increasing complex game to encourage them to develop in these areas. You can check out the details on an old blog post at http://howjo-gang.blogspot.com/2004/07/responsibility-encouragement-program.html. Basically it consisted of using a base allowance, merit and demerit points, and computer and video time to encourage the kids to participate in a variety of family activities and promote a healthy life balance.

Of course, we started simple and added complexity as the kids grew older.

Currently their all teenagers or older. Now they manage their own little business ventures, and participate in managing the family investments.

Key learning for us. Know your kids, be flexible to adapt and experiment, be clear about your values.

My children are currently 14 and 18 and have both received allowance since they were 5. I could claim that this was a brilliant plan on my part to impart financial prowess to them at an early age, but in fact it was a response to my son’s incessant desire for more and more Thomas the Train items. We just figured it was easier to give a quarter for each year of life and let him save for the trains rather than his constantly asking us for a new one each time we went to the mall.

In his case it was a huge success. It took 5 weeks for him to save up and he only ever wanted to go to the mall once every 5 weeks – we paid the rest. He was never in doubt as to what he wanted to do with his allowance, only which train to buy each time.

When he turned 6 we switched to a dollar per year of life, but now the money had to be divided up into three equal buckets. One third for saving for university, (he learned in JK that this was necessary to become a palaeontologist) one third for charity which was for our local church, and one third for spending which at that time still meant Thomas the Train. We have kept with that dollar per year of life ever since.

His 14 year old sister has gone through a similar allowance process. In both cases we have emphasized that they each have chores that must be done. There used to be lists on the fridge that had to be checked off, but now everyone knows their chores and that they are not paid by chore, but that chores must be done.

Several years ago at Christmas my daughter was very disappointed that she did not have the money she had hoped for to buy presents for her older brother and for my wife and myself. I casually suggested that if she saved a dollar a week, she would have $52 for Christmas next year. The following week when I doled out the allowance she had a new tin for her money. I asked what it was for and she proudly announced that it was for next Christmas. Even since then she has faithfully put that dollar a week aside, and recently she has even topped it up with a percentage of the birthday cash that comes her way. (As she is a June baby, I am impressed that she could look that far ahead and realize that money saved now will be useful 6 months away.)

In closing, give your kids allowance, discuss money openly and add more detail as time passes. My parents did it with my brother and I and we have both been very successful in managing our finances. My son had his first job last summer and saved every single penny for university so I am fairly confident that it is working with my children too.

My oldest son is 5 as well. We started him on an allowance when he was 4 at $4/week. BUT he was in charge of 4 chores per day that he had to do before he was allowed TV time. And he was in charge of buying himself treats and toys outside of special occasions. As well as small gifts for his family at Christmas.

Now he has 5 chores and earns $5 per week. His chores are not too time consuming and are more about good habits then work: Make bed, clean room, brush teeth, brush hair and get himself dressed. As he gets older we will add harder chores.
I loved introducing the allowance b/c it gave me an immediate response to him when he woould ask for aomething in a store.
“Mommy I want this.”
“Did you bring your money.”
“No.”
“Then next time you can bring some money and buy it for yourself.”

This is almost always the end of the conversation, and he usually forgets by the time we get home that he even wanted something, lol.

Oh I just wanted to add that my son does not equate his chores with allowance but with earning TV time since he does his chores every day and watches TV every day but only earns his allowance once a week.
At this time I prefer this b/c he sees that he has to do his “work” before he can have free time.
Also we plan to freeze his wages for the next several years b/c allowances will get VERY expensive with 3 kids otherwise.
Ie) When our oldest is 15 we would have paid out:
$15/w
$12/w
$10/w
and that equals $148/m. HOLY SMOKES!!

I use to give my children the 1 dollar a week per year of life. They had to put 10% into school, 10% gifts, 10% tithes, the rest split between spend now and longer term savings.

Both boys had to complete their weekly chores to get their allowances. Once they were ten they were to complete without nagging or no allowance. FAIL. Neither would so they were nagged, had to do the chores anyways and lost the allowance.

Fast forward a couple years and oldest gets a job at McDonald’s and is great with his money and categories. Adding some, removing some once he had a girlfriend etc.

A couple more years and son number 2 who has been constantly bailed out by daddy has a job. Mommy has to create the categories including one to pay off debt! It’s been three years, debt is gone, he is saving for a car but has been known to ‘steal’ from himself! He sells things people have given him and buys ‘junk food’. groan… Each child has their own personality and it doesn’t always ‘catch’ when you are teaching. My hope is that as he gets older he will finally get it!

So far, they have done things like collect beer and wine bottles from blue boxes, re-sell farm eggs to our neighbours and dog-sit.

We also encourage them to sort any money they have into three piles: first is for giving away, second is for saving and the last one if for spending.

I also make a point of letting my kids know about the organizations/people that we support, showing them our banking statements and letting them about the opportunity costs of our purchasing decisions(we don’t go out to the restaurant every week so that we can enjoy a camping trip in the summer).

Disclaimer

I am not god. I am a mere mortal as such my reality is defined by my own views. So your reality might not resemble mine because of your views. As such all opinions, ideas and investments on this blog might not work for you as they did for me. Be a big person and do your own research and make up your own mind before trying something. The opinions expressed are my own. You might need to contact a local professional for advice.